Agenda item

Report of Grant Thornton.

Grant Thornton presented the audit strategy document for the year ending 31 March 2009, and provided details on the key accounting and business risks as set out in the report. It was noted that the Annual Governance Statement, which was discussed in length at the previous meeting of the Committee, would be kept under review to ensure that it was fully reflective of the issues identified in the course of the audit of the accounts. Grant Thornton would also be following up on the recommendations made in the previous year to verify the progress made in implementing these.

In response to a question from the Committee regarding the valuation of land and buildings mentioned in the report, Grant Thornton reported that they would be checking that the valuations currently held were accurate and that assets had been valued using the appropriate valuation methods. It was also reported that, other than housing assets, which were re-valued annually, the Council’s assets were re-valued on a five-year rolling programme, and that the impact of inflation or deflation would be taken into account at the time of valuation. Specific areas may be re-valued outside of the rolling programme, where a significant fluctuation had been identified. The Chair noted that the professional discretion of the Section 151 officer was necessary in determining the best course of action regarding the sale of the Council’s assets.

The Chair asked whether the risk of land and buildings being overvalued, as mentioned in the report, would have any impact on service delivery, and it was confirmed by Graham Oliver, Corporate Finance, that there would be no impact on the Council’s service delivery. The Chair requested further details on the error identified within the previous Fixed Asset Register, and it was agreed that this would be provided.

The Chair asked for clarification of materiality in respect of the financial statements. Grant Thornton reported that the calculation was based on revenue expenditure, on which basis any error reaching the threshold of £6.5m would be classified as material and result in the Council’s accounts being qualified. Any identified errors greater than £124k, as 2% of materiality, would be reported in the financial statements. In response to a question from the Committee regarding issues identified beneath the £124k threshold, it was clarified that these were brought to the attention of officers for action, but were not reported to Members as part of the financial statements. The Chair expressed concern that matters below the threshold of £124k were not reported in the financial statements.

The Chair requested a copy of the trial balance, presented to the auditors on the commencement of fieldwork, for information.

In response to the request in the report for the Committee to provide input on any areas of concern within the Council, the Chair identified controls over management issues with the Alexandra Palace and Park Board and Alexandra Palace Trading Limited, the safeguarding of children and engagement with the Council’s partners as key concerns. A member of the Committee expressed concern that some of the issues raised fell within the remit of other Council bodies and not of the Audit Committee, and that duplication of effort must be avoided. The Chair agreed that duplication of effort should be avoided but it was his strong view that this was not duplication as, according to the Audit Committee’s terms of reference the Audit Committee was the appropriate forum to express the concerns. The Chair also reported that Grant Thornton had requested the input of the Committee and accordingly, as Chair of the Audit Committee, he had provided this input because the Council had been seen to be subsidising the overall yearly shortfall of Alexandra Palace and Park, whereas the Council had been seen not to be exercising any direct control on the basis that that Alexandra Park was a Trust, and because, as a result of the Council’s performance on safeguarding children, the overall rating of the Council was downgraded from three to one by Grant Thornton. As such, these were the genuine concerns of the Audit Committee, according to the Chair.

The Chair reported that the Audit Committee was eager to discharge its duties in relation to reviewing the Council’s internal financial controls, but noted that the Committee’s ability to carry out this duty effectively was dependent on the quality of the reports produced by the professional officers.

RESOLVED

That the content of the report be noted, with the above observations and concerns for actions.